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en-usMon, 19 Mar 2018 13:08:56 -0400Mon, 19 Mar 2018 13:08:56 -0400The latest news on Stocks from Business Insiderhttp://static3.businessinsider.com/assets/images/bilogo-250x36-wide-rev.pngBusiness Insiderhttp://www.businessinsider.com
http://www.businessinsider.com/stock-market-today-selloff-facebook-data-breach-roils-tech-industry-2018-3Stocks are getting whacked as Facebook's data breach roils the tech industryhttp://www.businessinsider.com/stock-market-today-selloff-facebook-data-breach-roils-tech-industry-2018-3
Mon, 19 Mar 2018 13:07:00 -0400Joe Ciolli
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static4.businessinsider.com/image/5a96e047aae6058d038b45e5-2000/gettyimages-126106038.jpg" alt="Mark Zuckerberg" data-mce-source="Justin Sullivan/Getty Images" data-mce-caption="Facebook CEO Mark Zuckerberg pauses as he delivers a keynote address during the Facebook f8 conference on September 22, 2011 in San Francisco, California. Facebook CEO Mark Zuckerberg kicked off the conference introducing a Timeline feature to the popular social network." /></p><p></p>
<ul>
<li><strong>Global stock markets saw deep losses Monday in the wake of a report over the weekend that Facebook suffered a data breach.</strong></li>
<li><strong>Facebook dropped as much as 8.1% on Monday, the biggest intraday decline since August 2015, dragging major indexes lower.</strong></li>
<li><strong>Follow the <a href="http://markets.businessinsider.com/index/dow_jones">Dow Jones industrial average</a> in real time.&nbsp;</strong></li>
</ul>
<hr />
<p><a href="http://markets.businessinsider.com/indices" target="_blank" rel="noopener">Stocks</a> fell around the world as technology shares dropped, led lower by a reported <a href="http://www.businessinsider.com/cambridge-analytica-trump-firm-facebook-data-50-million-users-2018-3?op=1" target="_blank" rel="noopener">data breach</a> that sent <a href="http://markets.businessinsider.com/stocks/fb-stock" target="_blank" rel="noopener">Facebook</a> sliding the most in 2 1/2 years.</p>
<p>Facebook's loss of as much as 8.1% spurred a decline of more than 2% in the tech-heavy <a href="http://markets.businessinsider.com/index/nasdaq_100" target="_blank" rel="noopener">Nasdaq 100</a> index, while the benchmark <a href="http://markets.businessinsider.com/index/s&amp;p_500" target="_blank" rel="noopener">S&amp;P 500</a> slid 1.5% and the <a href="http://markets.businessinsider.com/index/dow_jones" target="_blank" rel="noopener">Dow Jones industrial average</a> decreased 1.3%.</p>
<p>It's a situation that highlights an unfortunate reality about mega-cap technology firms like Facebook: While their outsized weighting in major indexes is a boon when their shares are rising, the comeuppance can be swift and unforgiving during times of weakness. And it leaves only one group poised to benefit: <a href="http://www.businessinsider.com/facebook-stock-price-cambridge-analytica-data-leak-falling-shares-help-one-investor-group-2018-3" target="_blank" rel="noopener">short sellers</a>.</p>
<p>It's also likely that investors are positioning ahead of the two-day <a href="http://www.businessinsider.com/category/federal-reserve" target="_blank" rel="noopener">Federal Reserve</a> meeting that starts on Tuesday. Newly appointed Fed chair Jerome Powell will be making his first decision on interest rates, and some market participants are fearful that hawkish actions will drive more equity selling. After all, the additional yield afforded by a rate hike theoretically makes bonds more attractive relative to their stock counterparts.</p>
<p>Selling pressure in equities was also felt in overseas markets, as the <a href="http://markets.businessinsider.com/index/nikkei_225" target="_blank" rel="noopener">Nikkei 225</a> lost 0.9%, the <a href="http://markets.businessinsider.com/index/shanghai_composite" target="_blank" rel="noopener">Shanghai Composite</a> fell 0.7%, and the <a href="http://markets.businessinsider.com/index/stoxx_europe_600" target="_blank" rel="noopener">Stoxx Europe 600</a> declined 1.2%.</p>
<p>Here's a rundown of other asset classes, including US Treasurys, which traders are <a href="http://www.businessinsider.com/wall-street-watching-3-percent-10-year-yield-2018-3" target="_blank" rel="noopener">closely watching</a>:</p>
<ul>
<li><a href="http://markets.businessinsider.com/rates/u-s--rates-10-years" target="_blank" rel="noopener">10-year US Treasurys</a> (+0.55%)</li>
<li><a href="http://markets.businessinsider.com/index/us-dollar-index" target="_blank" rel="noopener">US Dollar Index</a> (-0.28%)</li>
<li><a href="http://markets.businessinsider.com/commodities/oil-price?type=wti" target="_blank" rel="noopener">Crude oil</a> (WTI) (-0.18%)</li>
<li><a href="http://markets.businessinsider.com/index/vix" target="_blank" rel="noopener">Cboe Volatility Index</a> (VIX) (+24%)</li>
</ul>
<p>Looking specifically at tech, these were among the biggest non-Facebook decliners in the Nasdaq 100 on Monday: <a href="http://markets.businessinsider.com/stocks/klac-stock" target="_blank" rel="noopener">KLA-Tencor</a> (-6.9%), <a href="http://markets.businessinsider.com/stocks/ntes-stock" target="_blank" rel="noopener">NetEase</a> (-4.1%), <a href="http://markets.businessinsider.com/stocks/incy-stock" target="_blank" rel="noopener">Incyte</a> (-3.9%), <a href="http://markets.businessinsider.com/stocks/dish-stock" target="_blank" rel="noopener">Dish Network</a> (-3.8%), <a href="http://markets.businessinsider.com/stocks/broadcom-stock" target="_blank" rel="noopener">Broadcom</a> (-3.8%).</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static1.businessinsider.com/image/5aafebf0b085c026008b493a-870/screen shot 2018-03-19 at 125541 pm.png" alt="Screen Shot 2018 03 19 at 12.55.41 PM" data-mce-source="Markets Insider" data-link="http://markets.businessinsider.com/index/nasdaq_100" /></p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/stock-market-goldman-sachs-says-surprising-twist-playing-out-right-now-2018-3" >GOLDMAN SACHS: A 'surprising twist' is playing out in the stock market right now — here's how to capitalize on it</a></strong></p>
<p><a href="http://www.businessinsider.com/stock-market-today-selloff-facebook-data-breach-roils-tech-industry-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/journalist-vegas-tenold-investigated-neo-nazis-for-six-years-2018-3">Neo-Nazi groups let a journalist in their meetings and rallies — here's what he saw</a></p> http://www.businessinsider.com/stock-market-goldman-sachs-says-surprising-twist-playing-out-right-now-2018-3GOLDMAN SACHS: A 'surprising twist' is playing out in the stock market right now — here's how to capitalize on ithttp://www.businessinsider.com/stock-market-goldman-sachs-says-surprising-twist-playing-out-right-now-2018-3
Mon, 19 Mar 2018 09:16:49 -0400Joe Ciolli
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static2.businessinsider.com/image/59fb699a58a0c11e008b5da7-1400/rtx2116i.jpg" alt="trader surprised shocked" data-mce-source="Reuters / Lucas Jackson" /></p><p></p>
<ul>
<li><strong>Goldman Sachs notes a "surprising twist" playing out in the stock market that has created opportunities that haven't historically been available during these types of conditions.</strong></li>
<li><strong>The bank provides some recommendations around how to deal with these dynamics &mdash; one of which involves sticking with a familiar favorite.</strong></li>
</ul>
<hr />
<p>When the <a href="http://www.businessinsider.com/category/stock-market" target="_blank" rel="noopener">stock market</a> doesn't behave the way one might expect, that's actually when some of the best opportunities crop up.</p>
<p>Such a situation is playing out right now, as so-called growth stocks continue a prolonged stretch of dominance.</p>
<p>A long-short growth investment factor maintained by <a href="http://markets.businessinsider.com/stocks/gs-stock" target="_blank" rel="noopener">Goldman Sachs</a> has returned 5% in the past month, putting it in the 98th percentile of historical monthly returns. What's more, the strategy gained 9% in 2017, its best calendar year since 2007.</p>
<p>With this in mind, popular intuition may suggest growth would soon give way to the so-called value trade, which involves scooping up stocks at prices deemed undervalued. After all, throughout the history of the stock market, these two strategies have alternated leadership.</p>
<p>In what Goldman describes as a "surprising twist," such a reversal is not imminent. In fact, the firm says growth stocks have further to run.</p>
<p>First, despite their recent streak of outperformance, growth stocks remain attractively priced. For example, firms with long-term growth estimates of 20% to 30% are trading at a median price-to-earnings multiple of 22 times, which is in just the 58th percentile, according to Goldman data.</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static4.businessinsider.com/image/5aafb2831225bc31008b49bf-800/screen shot 2018-03-19 at 85144 am.png" alt="Screen Shot 2018 03 19 at 8.51.44 AM" data-mce-source="Goldman Sachs" /></p>
<p>The second argument in favor of growth stocks is one based around a market measure called dispersion, which measures the magnitude of single-security moves compared with a benchmark index. That the measure is so tight marks another shortcoming of the value trade. For context, wider dispersion has historically preceded value outperformance.</p>
<p>"Unlike the growth rally in the late 1990s, which widened P/E dispersion and set the stage for value outperformance from 2000-02, today there appears to be less potential energy stored for a value stock rebound," David Kostin, Goldman's chief US equity strategist, wrote in a client note.</p>
<p>So what does this all mean for you, the investor? For starters, perhaps you should start seeking out exposure to the growth trade, if you haven't already. And if you still wish to stubbornly cling to a value trade, Goldman recommends healthcare above all other industries &mdash; because that's where dispersion is the widest.</p>
<p>If you wish to stick with growth, Goldman has a 50-stock basket of companies spanning all 11 major industries. The stocks in the group are based on realized and consensus forward earnings and sales growth. Here's a five-company sampling: <strong>Netflix, Costco Wholesale, E-Trade Financial, Vertex Pharmaceuticals, and Micron Technology</strong>.</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static5.businessinsider.com/image/5aafad12b085c011598b4778-800/screen shot 2018-03-19 at 82742 am.png" alt="Screen Shot 2018 03 19 at 8.27.42 AM" data-mce-source="Goldman Sachs" /></p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/stock-market-wall-street-wall-of-money-at-odds-with-struggling-market-michael-hartnett-marko-kolanovic-2018-3" >Wall Street's 'wall of money' is at odds with the struggling market — but one expert says not to worry</a></strong></p>
<p><a href="http://www.businessinsider.com/stock-market-goldman-sachs-says-surprising-twist-playing-out-right-now-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/555-phone-number-tv-movies-telephone-exchange-names-ghostbusters-2018-3">Why 555 is always used for phone numbers on TV and in movies</a></p> http://www.businessinsider.com/european-stocks-dive-on-monday-ahead-of-a-huge-week-2018-3European stocks dive on Monday ahead of a huge weekhttp://www.businessinsider.com/european-stocks-dive-on-monday-ahead-of-a-huge-week-2018-3
Mon, 19 Mar 2018 06:22:22 -0400Helen Reid
<p><strong><img src="http://static5.businessinsider.com/image/5aaf8f8342e1cc3871654653-799/stock-futures-point-to-flat-open-as-trade-war-fears-linger-2018-3.jpg" alt="A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., March 14, 2018. REUTERS/Andrew Kelly" data-mce-source="Thomson Reuters" data-mce-caption="A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York" /></strong></p>
<ul>
<li><strong>European stocks fall on Monday ahead of a busy week of economic news.</strong></li>
<li><strong>Investors are cautious ahead of an expected interest rate hike from the US Federal Reserve on Wednesday.</strong></li>
<li><strong>Eyes were also on a news conference on Brexit negotiations, hastily scheduled by the European Commission for 11.45 a.m. GMT.</strong></li>
</ul>
<p>LONDON (Reuters) - European shares fell on Monday as investors remained cautious ahead of an expected Fed rate hike, while earnings and M&amp;A took center stage with software company Micro Focus sinking and a bid for Hammerson boosting commercial real estate stocks.</p>
<p>Micro Focus dropped 55 percent to a three-year low after it cut its annual revenue forecast and its CEO quit. Revenue was hit by lower license income and issues with its purchase of Hewlett Packard Enterprise assets.</p>
<p>The firm's shedding of more than half its market value caused Europe's tech sector index to tumble 2.4 percent, its worst fall since early February when global markets sank.</p>
<p>A scuppered cross-border commercial real estate deal also made waves on Monday, with Hammerson soaring 27 percent to the top of the STOXX 600 after saying it had rebuffed a takeover offer from France's Klepierre.</p>
<p>The offer, which strategists said would have helped Klepierre gain a foothold in the UK market, valued Hammerson's shares at a 40.7 percent premium to Friday's closing price.</p>
<p>Before today's surge Hammerson's shares were down 19.8 percent year-to-date, making them attractive to potential suitors. The rejection sent Klepierre shares down 3.5 percent.</p>
<p>"Klepierre owns and operates 100 shopping centres in 16 countries across Europe and the quality has been improved over the past 5 years, with the UK the missing part of the jigsaw (the same could be said of Unibail)," said Liberum strategists, referring to Klepierre competitor Unibail Rodamco.</p>
<p>Europe's main benchmark, the STOXX 600 index, fell 0.7 percent as investors held their breath ahead of Wednesday's U.S. Federal Reserve meeting which marks the debut for new Fed Chair Jerome Powell, and a likely interest rate hike.</p>
<p>Eyes were also on a news conference on Brexit negotiations, hastily scheduled by the European Commission for 1145 GMT, as speculation swirled over a potential interim deal ahead of the EU Summit later in the week.</p>
<p>Disappointing results weighed on German consumer goods firm Henkel, which fell 5.1 percent after it said the first quarter was off to a slow start due to delivery difficulties in North America.</p>
<p>While Hammerson's surge higher drove the European real estate sector index up 0.8 percent to the top spot, tech stocks were the worst performers.</p>
<p>Even before Micro Focus' dramatic drop, European investors' sentiment had been turning more cautious on the tech sector which has led stellar gains across global markets.</p>
<p>Unicredit analysts on Monday said they had downgraded the tech sector to 'neutral' and upgraded utilities to overweight, arguing investors should increase their share of defensive sectors with economic indicators at elevated levels.</p>
<p>German food processing machinery maker GEA Group gained 4 percent after the firm said its CEO Juerg Oleas was to step down in April 2019 after more than a decade in office.</p>
<p>Sweden's Dometic fell 3.5 percent after the recreational vehicle products firm was downgraded to "underweight" by Morgan Stanley, whose strategists said the U.S. RV market is overheating.</p><p><a href="http://www.businessinsider.com/european-stocks-dive-on-monday-ahead-of-a-huge-week-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/jake-bernstein-panama-papers-offshore-banking-shell-companies-2018-2">How the super-wealthy hide billions using tax havens and shell companies</a></p> http://www.businessinsider.com/goldman-sachs-trade-recommendations-for-merger-and-acquisition-activity-pickup-2018-3Wall Street is expecting an M&A explosion this year — and Goldman Sachs knows how you can make a killing betting on ithttp://www.businessinsider.com/goldman-sachs-trade-recommendations-for-merger-and-acquisition-activity-pickup-2018-3
Sun, 18 Mar 2018 13:12:00 -0400Business Insider
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static5.businessinsider.com/image/5aabcb7292c06931008b468d-2000/gettyimages-93093701.jpg" alt="trader happy smile" data-mce-source="Getty Images / Mario Tama" /></p><p></p>
<ul>
<li><strong>The consensus on Wall Street is that merger and acquisition (M&amp;A) activity is going to accelerate after a relatively slow 2017.</strong></li>
<li><strong>The derivatives team at Goldman Sachs has outlined how investors can use options to both identify and capitalize on M&amp;A speculation.</strong></li>
</ul>
<hr />
<p>It's common knowledge that positioning for a share price spike following the announcement of a <a href="http://www.businessinsider.com/category/ma" target="_blank" rel="noopener">merger and acquisition</a> (M&amp;A) deal is a great way to make a quick buck in the <a href="http://www.businessinsider.com/category/stock-market" target="_blank" rel="noopener">stock market</a>.</p>
<p>Companies are usually purchased at a premium to their current market value, which leads to a stock surge as investors rush to close the pricing gap. With that in mind, it would seem that the best possible way to trade on M&amp;A speculation would be to simply buy shares of potential targets.</p>
<p>Not so fast, says <a href="http://markets.businessinsider.com/stocks/gs-stock" target="_blank" rel="noopener">Goldman Sachs</a>. Katherine Fogertey and the rest of the firm's derivatives strategy team thinks you can do a whole lot better than that.</p>
<p>But before we get into their recommendations, let's first look at what's at stake. Many Wall Street firms &mdash; including Goldman, <a href="http://markets.businessinsider.com/stocks/bac-stock" target="_blank" rel="noopener">Bank of America</a>, <a href="http://markets.businessinsider.com/stocks/wfc-stock" target="_blank" rel="noopener">Wells Fargo</a>, and Robert W. Baird &mdash; are in <a href="http://www.businessinsider.com/wall-street-thinks-tax-reform-will-help-one-crucial-market-area-2018-1" target="_blank" rel="noopener">full agreement that M&amp;A is due for a major pick-up</a>&nbsp;this year. Their optimism comes on the&nbsp;heels of a disappointing 2017 that saw global mergers fall 9%.</p>
<p>The general consensus is that <a href="http://www.businessinsider.com/category/tax-reform" target="_blank" rel="noopener">tax reform</a> will be the major driver, given the huge glut of repatriated cash flowing back into the US from overseas. Going off that, Goldman recently forecast a 6% increase in cash M&amp;A spending to $355 billion in 2018.</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static1.businessinsider.com/image/5aabcebfb085c019008b4682-800/screen shot 2018-03-16 at 100257 am.png" alt="Screen Shot 2018 03 16 at 10.02.57 AM" data-mce-source="Goldman Sachs" /></p>
<p>So what's a trader to do? Goldman has identified two crucial steps for investors to consider.</p>
<h3>1) Identify whether an M&amp;A premium is already priced into a stock</h3>
<p>Goldman's strategy for identifying potential M&amp;A candidates involves analyzing the footprints left behind by trades that investors do when they see high potential for a takeover. This is an important first step in identifying opportunities for stock price appreciation.</p>
<p>One way the firm does this is by looking at a measure called skew, which is the premium being paid for out-of-the-money (OTM)&nbsp;<a href="http://www.businessinsider.com/category/options" target="_blank" rel="noopener">options</a>. For this scenario, Goldman is looking for increases in call prices relative to puts, since investors buy short-dated calls to position for M&amp;A-driven stock spikes.</p>
<p>Goldman also looks at term structure, or the trend of <a href="http://www.businessinsider.com/category/volatility" target="_blank" rel="noopener">volatility</a>&nbsp;being expected in the future. The firm notes that a decrease in long-dated options prices relative to short-dated ones is another signal suggesting investors are already positioning for a deal.</p>
<h3>2) Make the following types of option trades to capitalize on opportunities identified during step 1</h3>
<p>Goldman has two distinct strategies for expressing a view on M&amp;A potential.&nbsp;</p>
<p>The first is the purchase of three-month OTM call options. And the second method is the sale of 12-month, OTM&nbsp;strangles &mdash; defined as the simultaneous selling of a slightly OTM&nbsp;put and a slightly OTM&nbsp;call of the same underlying stock and expiration date.</p>
<p>Better yet, Goldman says these trades become even more effective when used in tandem.</p>
<p>However, in the end, it's important to remember that these trades are ineffective unless an investor is first able to locate soft spots in trader positioning. That's why the two steps laid out above are so important. One leads nicely into the other &mdash; and they both hopefully lead to some big gains for M&amp;A speculators.</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/asset-manager-fees-in-trouble-big-wall-street-firms-at-risk-says-morgan-stanley-oliver-wyman-2018-3" >An 'Amazon-type marketplace' could cut asset-management fees in half — and some of Wall Street's biggest names could take a huge hit</a></strong></p>
<p><a href="http://www.businessinsider.com/goldman-sachs-trade-recommendations-for-merger-and-acquisition-activity-pickup-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/rise-and-fall-of-hooters-airline-myrtle-beach-bob-brooks-atlanta-airplanes-2018-2">The rise and fall of Hooters Air — the airline that lost the 'breastaurant' $40 million</a></p> http://www.businessinsider.com/11-stocks-ubs-says-to-avoid-in-trade-war-2018-3Trump's trade war is heating up — here are 11 stocks UBS says to avoidhttp://www.businessinsider.com/11-stocks-ubs-says-to-avoid-in-trade-war-2018-3
Sun, 18 Mar 2018 09:13:00 -0400Business Insider
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static4.businessinsider.com/image/5aa923803be59f1c008b459d-2000/ap17198757229958.jpg" alt="Trump Xi trade war" data-mce-source="AP/Saul Loeb" data-mce-caption="US President Donald Trump, left, and Chinese President Xi Jinping arrive for a meeting on the sidelines of the G-20 Summit in Hamburg, Germany." /></p><p></p>
<ul>
<li><strong>Companies that get a high percentage of their revenue from China are at heightened risk as the prospect of a global trade war mounts.</strong></li>
<li><strong>UBS has identified 11 companies with large exposure to China that it says traders would be wise to avoid.</strong></li>
</ul>
<hr />
<p>Fears of a global <a href="http://www.businessinsider.com/category/trade-war" target="_blank" rel="noopener">trade war</a> have been ratcheted up in recent days amid <a href="http://www.businessinsider.com/trump-trade-war-china-threatens-retaliate-us-2018-3" target="_blank" rel="noopener">warnings from China</a> that it won't take President <a href="http://www.businessinsider.com/category/donald-trump" target="_blank" rel="noopener">Donald Trump</a>'s newly proposed tariffs lying down.</p>
<p>Earlier in March, the nation said it will respond in kind if Trump's measures harm it economically. But that doesn't seem to be impeding the president's mission, with reports coming in Wednesday that he's seeking to <a href="http://www.businessinsider.com/trump-reportedly-looking-at-60-billion-tariffs-on-chinese-tech-imports-2018-3" target="_blank" rel="noopener">impose upon China tariffs of up to $60 billion</a>. Trump will reportedly target the technology and telecom sectors.</p>
<p>In the event that China does retaliate in response to Trump's proposed tariffs, <a href="http://markets.businessinsider.com/stocks/ubs-stock" target="_blank" rel="noopener">UBS</a> says the companies that derive the highest percentage of their sales from there will be among the groups hit hardest. Further, a large number of the most exposed companies are in the tech sector &mdash; suggesting that mounting trade war tensions could weigh on one of the US market's most important industries.</p>
<p>Here are 11 companies identified by UBS as being particularly vulnerable to a global trade war, specifically one that involves China. The stocks are listed in increasing order of percentage revenue exposure to China.</p><h3>11. Xilinx</h3>
<img src="http://static4.businessinsider.com/image/5aa91f1d3be59f1a008b4593-400-300/11-xilinx.jpg" alt="" />
<p><p><strong>Ticker:</strong>&nbsp;XLNX</p>
<p><strong>Industry: </strong>Technology</p>
<p><strong>% of sales from China: </strong>24.6%</p></p>
<br/><br/><h3>10. Expeditors International of Washington</h3>
<img src="http://static4.businessinsider.com/image/5aa91ed63be59f22008b4567-400-300/10-expeditors-international-of-washington.jpg" alt="" />
<p><p><strong>Ticker:</strong>&nbsp;EXPD</p>
<p><strong>Industry: </strong>Industrials</p>
<p><strong>% of sales from China: </strong>26.5%</p></p>
<br/><br/><h3>9. Amphenol</h3>
<img src="http://static1.businessinsider.com/image/5aa91e993be59f1c008b4902-400-300/9-amphenol.jpg" alt="" />
<p><p><strong>Ticker:</strong>&nbsp;APH</p>
<p><strong>Industry: </strong>Technology</p>
<p><strong>% of sales from China: </strong>28.6%</p></p>
<br/><br/><a href="http://www.businessinsider.com/11-stocks-ubs-says-to-avoid-in-trade-war-2018-3#/#8-microchip-technology-4">See the rest of the story at Business Insider</a> http://www.businessinsider.com/stock-market-wall-street-wall-of-money-at-odds-with-struggling-market-michael-hartnett-marko-kolanovic-2018-3Wall Street's 'wall of money' is at odds with the struggling market — but one expert says not to worryhttp://www.businessinsider.com/stock-market-wall-street-wall-of-money-at-odds-with-struggling-market-michael-hartnett-marko-kolanovic-2018-3
Sun, 18 Mar 2018 06:05:00 -0400Joe Ciolli
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static4.businessinsider.com/image/59824ca676084a1e008b4847-1201/bigraphicsrestandvest6.png" alt="rest and vest, money, high-paid, not working" data-mce-source="BI Grahics/Anaele Pelisson" /></p><p></p>
<ul>
<li><strong>The heavy recent inflows to equity funds don't match up with what Bank of America Merrill Lynch calls "lackluster" cross-asset returns.</strong></li>
<li><strong>One Wall Street expert thinks the stock market can recover and even hit new highs in the coming months.</strong></li>
</ul>
<hr />
<p>A quick glance at a chart of US equity performance suggests the market is rebounding nicely from the 10% correction it suffered in early February. And while it hasn't exactly been a smooth ride, the benchmark <a href="http://markets.businessinsider.com/index/s&amp;p_500" target="_blank" rel="noopener">S&amp;P 500</a> is still just 4% from its all-time high.</p>
<p>But <a href="http://www.businessinsider.com/category/bank-of-america-merrill-lynch" target="_blank" rel="noopener">Bank of America Merrill Lynch</a> says it should be doing even better, considering the mountain of cash being poured into <a href="http://www.businessinsider.com/category/stocks" target="_blank" rel="noopener">stocks</a>.</p>
<p>Equity funds absorbed a record $43.3 billion of inflows over the past week, according to data compiled by BAML. That puts the "more humble" $2.4 billion taken in by <a href="http://www.businessinsider.com/category/bonds" target="_blank" rel="noopener">bond</a> funds over the same period to shame.</p>
<p>In fact, stock inflows have been so heavy that they're now outpacing their fixed-income counterparts for the first time since 2013 on an annualized basis, BAML data show.</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static4.businessinsider.com/image/5aac100392c0692a008b4791-881/screen shot 2018-03-16 at 24152 pm.png" alt="Screen Shot 2018 03 16 at 2.41.52 PM" data-mce-source="Bank of America Merrill Lynch" /></p>
<p>In order to drive home just how little the stock market has done with these inflows, BAML highlights the $25 trillion <a href="http://markets.businessinsider.com/index/nyse-composite" target="_blank" rel="noopener">NYSE Composite Index</a>, which was down on a year-to-date basis through Friday. Meanwhile, emerging-market stocks are up just 5.5%, while US equities as a whole have increased just 3.4%.</p>
<p>And those are the two best-performing asset classes of the year &mdash; it's all downhill from there. Government bonds have returned just 2.2%, while gold, oil, and high-yield bonds have failed to exceed 1.7%.</p>
<p>The "wall of money" being deployed is "at odds with lackluster cross-asset returns," BAML chief investment strategist Michael Hartnett wrote in a client note. "Chart-topping inflows are not coinciding with headline returns."</p>
<p>But Hartnett's consternation may be fleeting, at least if the most recent outlook from <a href="http://www.businessinsider.com/category/marko-kolanovic" target="_blank" rel="noopener">Marko Kolanovic</a> &mdash;&nbsp;<a href="http://markets.businessinsider.com/stocks/jpm-stock" target="_blank" rel="noopener">JPMorgan</a>'s global head of quantitative and derivatives strategy &mdash; comes to fruition.</p>
<p>He argues escalating fears over a global trade war are overblown, and the negative effect it's had on markets will be temporary. Once that psychological overhang is removed, stocks could once again re-test highs. Kolanovic also says the systematic outflows that <a href="http://www.businessinsider.com/xiv-svxy-short-vix-volatility-trade-blow-up-2018-2" target="_blank" rel="noopener">worsened the stock correction</a> in February will reverse in coming months, which could push equities back to record levels.</p>
<p>The fact that Kolanovic even has to address these issues shows the impact they're having on stocks &mdash; and perhaps explains why they've had trouble matching the record-setting nature of their fund inflows.</p>
<p>"Our views on risks and equity upside have been confirmed by markets," he said. "The market should reach all-time highs relatively soon."</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/asset-manager-fees-in-trouble-big-wall-street-firms-at-risk-says-morgan-stanley-oliver-wyman-2018-3" >An 'Amazon-type marketplace' could cut asset-management fees in half — and some of Wall Street's biggest names could take a huge hit</a></strong></p>
<p><a href="http://www.businessinsider.com/stock-market-wall-street-wall-of-money-at-odds-with-struggling-market-michael-hartnett-marko-kolanovic-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/how-jay-z-and-diddy-made-millions-off-of-cheap-alcohol-zack-omalley-greenburg-2018-3">How Jay-Z and Diddy used their fame to make millions off of 'cheap grapes'</a></p> http://www.businessinsider.com/stock-market-everything-going-right-for-one-group-set-for-record-highs-2018-3Everything is going exactly right for one group of stocks poised to smash record highshttp://www.businessinsider.com/stock-market-everything-going-right-for-one-group-set-for-record-highs-2018-3
Sat, 17 Mar 2018 14:07:00 -0400Business Insider
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static4.businessinsider.com/image/5a201fbaf914c31e008b6f69-2048/rtxhrsv.jpg" alt="trader celebration" data-mce-source="Reuters / Paulo Whitaker" data-mce-caption="Stock traders celebrate the record streak of outperformance for active managers." /></p><p></p>
<ul>
<li><strong>As volatility has picked up in equities, it has become increasingly important to identify specific areas of the stock market poised for strength.</strong></li>
<li><strong>Bank of America Merrill Lynch is highly constructive in the near term on one group that has everything going for it at the moment.</strong></li>
</ul>
<hr />
<p>When market sell-offs hit, it's usually the smaller, less liquid stocks that get hurt the most.</p>
<p>But last month, when the <a href="http://www.businessinsider.com/category/stock-market" target="_blank" rel="noopener">stock market</a> suffered its first 10% correction in years, the opposite happened. Large-cap companies actually fell more than their small-cap counterparts, bucking conventional wisdom.</p>
<p>And if they didn't already have enough going for them, <a href="http://www.businessinsider.com/category/small-caps" target="_blank" rel="noopener">small-caps</a> proceeded to beat their larger peers on the way back up. Now, the group's double dip of resilience and good fortune has it poised to shatter records.</p>
<p><img src="http://static1.businessinsider.com/image/5aa943dc3be59f1c008b45fd-1200/3-14-18-small-vs-large-cap-cotd.png" alt="3 14 18 small vs large cap COTD" data-mce-source="Bank of America Merrill Lynch" data-mce-caption="Small-caps have been outperforming their larger peers since early February, a period that has featured both a major sell-off and a return to near-record highs." /></p>
<p>So how did small-caps find themselves in this situation? The <a href="http://www.businessinsider.com/category/bank-of-america-merrill-lynch" target="_blank" rel="noopener">Bank of America Merrill Lynch</a> equity strategist Dan Suzuki has identified three main drivers.</p>
<p>First, he notes that the relative illiquidity seen in small-caps actually benefited them during the early-February market meltdown, which was worsened by forced selling in <a href="http://www.businessinsider.com/category/volatility" target="_blank" rel="noopener">volatility</a> products. Since small-caps are more thinly traded, they weren't as vulnerable to sharp, sudden price movements.</p>
<p>Second, Suzuki highlights the new tax law as having an outsize positive impact on small-caps. He says the group, on average, paid higher taxes before the cuts and would therefore see a bigger profitability boost.</p>
<p>Third, he argues the escalating prospect of a global trade war will favor more domestically focused companies, such as small-caps. It's a dynamic that has <a href="http://www.businessinsider.com/stock-market-selloff-one-group-poised-to-defy-investor-trade-war-fears-2018-3" target="_blank" rel="noopener">already played out</a> since President <a href="http://www.businessinsider.com/category/donald-trump" target="_blank" rel="noopener">Donald Trump</a> first announced tariffs on steel and aluminum, with small-caps outperforming broader indexes.</p>
<p>Beyond those three factors and looking forward, Suzuki says small-caps are more appealing on a valuation basis. He bases this on how much small-cap prices have contracted since November, noting that both mid- and large-cap indexes have seen more moderate pullbacks, making them expensive by comparison.</p>
<p>Don't believe Suzuki? Well, he has company on Wall Street, with Goldman Sachs also espousing the positive characteristics of small-caps. In the weeks following February's 10% correction, <a href="http://www.businessinsider.com/stock-market-post-selloff-buy-recommendations-goldman-sachs-2018-2" target="_blank" rel="noopener">Goldman highlighted small-caps</a> as one of the two best stock market bets, on an investment-factor basis.</p>
<p>"We maintain our tactically bullish stance on small-caps over large-caps given the accelerating economic and corporate profit outlook," Suzuki wrote in a client note. "The near-term risks appear firmly to the upside."</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/global-markets-undergoing-major-change-leaving-investors-at-risk-2018-3" >'No places to hide': Global markets are undergoing a major change that's left investors at serious risk</a></strong></p>
<p><a href="http://www.businessinsider.com/stock-market-everything-going-right-for-one-group-set-for-record-highs-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/tesla-model-3-best-worst-features-elon-musk-2018-2">The best and worst things about the Tesla Model 3</a></p> http://www.businessinsider.com/global-markets-undergoing-major-change-leaving-investors-at-risk-2018-3'No places to hide': Global markets are undergoing a major change that's left investors at serious riskhttp://www.businessinsider.com/global-markets-undergoing-major-change-leaving-investors-at-risk-2018-3
Sat, 17 Mar 2018 13:10:00 -0400Business Insider
<p><img src="http://static4.businessinsider.com/image/5aa7d8873be59f23008b4635-2000/gettyimages-921402802.jpg" alt="trader hide" data-mce-source="Getting Images / Spencer Platt" /></p><p></p>
<ul>
<li><strong>For much of the past few years, investors have had plentiful options when it comes to hedging to the downside.</strong></li>
<li><strong>Goldman Sachs argues that markets are going through a major change that's threatening traders' ability to feel safe in their investments.</strong></li>
</ul>
<hr />
<p>Whether you've been a staunch bull or skeptical bear over the past few years, there have always been places to hide if you want to get away from it all.</p>
<p><a href="http://markets.businessinsider.com/rates/u-s--rates-10-years" target="_blank" rel="noopener">Treasurys</a>, gold, and safe-haven currencies like the <a href="http://markets.businessinsider.com/currencies/usd-jpy" target="_blank" rel="noopener">Japanese yen</a> and the <a href="http://markets.businessinsider.com/currencies/usd-chf" target="_blank" rel="noopener">Swiss franc</a> have been reliable hedges of sorts, providing needed fallback returns during risk-off environments.</p>
<p>That's no longer the case, and it has left traders with "no places to hide," Goldman Sachs says.</p>
<p><img style="float:right;" src="http://static6.businessinsider.com/image/5aa7e3543be59f1b008b459b-547/screen shot 2018-03-13 at 103436 am.png" alt="Screen Shot 2018 03 13 at 10.34.36 AM" data-mce-source="Goldman Sachs" /></p>
<p>The firm notes the diverging performance of Treasurys and other haven assets, marking a reversal from last year when they were moving in lockstep. This development challenges the reliability of what have historically been viewed as surefire hedges.</p>
<p>Goldman attributes the market shake-up to two drivers it says have thrown the long-standing <a href="http://www.businessinsider.com/market-valuations-goldman-sachs-warns-most-expensive-since-1900-2017-11" target="_blank" rel="noopener">Goldilocks market</a> &mdash; characterized by strong growth without inflation &mdash; out of whack.</p>
<p>The first is the pressure caused by higher rates and monetary tightening from the <a href="http://www.businessinsider.com/category/federal-reserve" target="_blank" rel="noopener">Federal Reserve</a>. While the market largely expected the central bank's initial rate hikes, they've still led to a "rate shock environment," Goldman says. The firm also blames an unexpectedly weak dollar, which it says has been driven by global growth.</p>
<p>Another measure informing Goldman's conclusion that effective hedges are scarce is the degree to which traditional haven assets are tracking the <a href="http://markets.businessinsider.com/index/vix" target="_blank" rel="noopener">Cboe Volatility Index</a>, known as the VIX. None of the 21 assets Goldman looked at had a positive beta to the VIX, which has led to "diversification desperation," it said. (See the chart below for details.)</p>
<p>For context, the VIX trades inversely to the benchmark <a href="http://markets.businessinsider.com/index/s&amp;p_500" target="_blank" rel="noopener">S&amp;P 500</a> roughly 80% of the time, suggesting it's an effective hedge for the equity index. Theoretically, if haven assets are trading with a positive beta to the VIX, they should be doing their job as hedges. But that's apparently not the case right now.</p>
<p>"No safe havens &mdash; and no assets or equity sectors &mdash; have had a positive beta to the VIX recently," Goldman strategists led by Ian Wright wrote in a note to clients. "Finding effective hedges in the cash space will continue to be difficult going forward as rates rise and Goldilocks fades."</p>
<p><img src="http://static2.businessinsider.com/image/5aa7e6153be59f1c008b4650-806/screen shot 2018-03-13 at 105400 am.png" alt="Screen Shot 2018 03 13 at 10.54.00 AM" data-mce-source="Goldman Sachs" /></p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/etf-industry-growth-interview-with-martin-small-blackrock-ishares-investor-letter-2018-3" >The head of a $1 trillion ETF provider shares a bold prediction for the record-shattering industry</a></strong></p>
<p><a href="http://www.businessinsider.com/global-markets-undergoing-major-change-leaving-investors-at-risk-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/why-nasa-has-not-sent-humans-to-mars-2018-2">The surprising reason why NASA hasn't sent humans to Mars yet</a></p> http://www.businessinsider.com/etf-industry-growth-interview-with-martin-small-blackrock-ishares-investor-letter-2018-3The head of a $1 trillion ETF provider shares a bold prediction for the record-shattering industryhttp://www.businessinsider.com/etf-industry-growth-interview-with-martin-small-blackrock-ishares-investor-letter-2018-3
Sat, 17 Mar 2018 12:14:00 -0400Business Insider
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static3.businessinsider.com/image/5aa7c61e3be59f1e008b45e8-2200/rtxzi4a.jpg" alt="crystal ball" data-mce-source="Reuters / Andy Clark" /></p><p></p>
<ul>
<li><strong>The $4.5 trillion exchange-traded fund industry is shattering all sorts of records for growth.</strong></li>
<li><strong>Martin Small, the head of BlackRock iShares for the US and Canada, has a bold prediction for the industry.</strong></li>
</ul>
<hr />
<p><em>How did we ever live without them?</em></p>
<p>That's the first line of the annual <a href="https://www.ishares.com/us/lp/ishares-investors" target="_blank" rel="noopener">investor letter</a> from <a href="https://www.blackrock.com/investing/biographies/martin-small" target="_blank" rel="noopener">Martin Small</a>,&nbsp;<span>who's responsible for more than $1 trillion as the head of&nbsp;</span>BlackRock&nbsp;<a href="https://www.ishares.com/us" target="_blank" rel="noopener">iShares</a>&nbsp;for the US and Canada. And it raises a question many people have been asking themselves about&nbsp;<a href="http://www.businessinsider.com/category/etfs" target="_blank" rel="noopener">exchange-traded funds</a>.</p>
<p>Small would seem to have a point. With the global ETF industry growing beyond $4.5 trillion for the first time in 2017 &mdash; including $1.8 trillion in assets under management for iShares, the world's biggest provider &mdash; the hottest investment vehicle around is more everpresent than at any other point in history.</p>
<p>Which is why Small feels comfortable making a bold prediction: by 2020, half of US investors will have made ETFs an "integral part of how they build portfolios."</p>
<p>If that seems far-fetched, consider that one-in-three US investors already owns at least one ETF, according to a <a href="https://www.ishares.com/us/resources/insights/etf-pulse" target="_blank" rel="noopener">survey conducted by iShares</a>. But where is the growth coming from?</p>
<p><img style="float:right;" src="http://static2.businessinsider.com/image/5a6658f300d0eff5018b4884-360/martin small.jpg" alt="martin small" data-mce-source="ETF.com" data-link="http://www.etf.com/" /></p>
<p>"The people who are already in ETFs are just going deeper," Small told Business Insider by phone. "And there are people coming from single securities and high-priced products into ETFs."</p>
<p>In the US market alone, ETFs saw combined assets climb to more than $3.6 trillion in January, a roughly $1 trillion year-over-year increase, according to <a href="https://www.ici.org/research/stats/etf/etfs_01_18" target="_blank" rel="noopener">Investment Company Institute</a> data.</p>
<p>A big part of that 12-month increase stems from an increased profile for ETFs, a wider range of offerings, and record-setting market performance that investors were fearful of missing.</p>
<p>"2017 was a real breakout year, the first one where we really started propelling towards seismic change," Small said. "Maybe in five years, people will look back at my letter and marvel at the fact that we used to do it another way."</p>
<p>A great deal of interest in iShares ETFs has come from overseas, as indicated by the $201 billion that global investors poured into US iShares funds in 2017, according to BlackRock data.</p>
<p>The firm is also reaching a younger audience, as evidenced by a <a href="http://www.businessinsider.com/millennials-leading-etf-exchange-traded-fund-revolution-interview-with-martin-shares-blackrock-ishares-2018-1" target="_blank" rel="noopener">survey of more than 1,000 people</a> conducted by iShares in January. They found that roughly 42% of the millennials surveyed own ETFs, up from 33% last year, the biggest jump of any category.&nbsp;Further, 85% of millennials surveyed said they were planning to buy ETF exposure in the next year.</p>
<p>But perhaps most importantly of all, Small notes ETFs have given people a sense of comfort and clarity in an increasingly complex investment landscape:&nbsp;</p>
<p>"All the academic research and investment techniques that people put in opaque or non-transparent wrappers have been demystified thanks to the transparency of ETFs," said Small. "That&rsquo;s why we like to ask: How did we ever live without them?"</p>
<p><strong>Read the full BlackRock iShares investor letter <a href="https://www.ishares.com/us/lp/ishares-investors" target="_blank" rel="noopener">here</a>.</strong></p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/barclays-bond-business-top-underwriter-interview-explanation-2018-3" >Barclays has now run point on the 3 biggest debt deals in history — here's how it's able to punch above its weight class</a></strong></p>
<p><a href="http://www.businessinsider.com/etf-industry-growth-interview-with-martin-small-blackrock-ishares-investor-letter-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/how-jay-z-and-diddy-made-millions-off-of-cheap-alcohol-zack-omalley-greenburg-2018-3">How Jay-Z and Diddy used their fame to make millions off of 'cheap grapes'</a></p> http://www.businessinsider.com/stock-market-meltdown-wall-street-agreement-could-lead-to-next-selloff-2018-3Wall Street is in full agreement about one key element of the stock market — and that could cause the next big meltdownhttp://www.businessinsider.com/stock-market-meltdown-wall-street-agreement-could-lead-to-next-selloff-2018-3
Sat, 17 Mar 2018 10:09:00 -0400Business Insider
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static1.businessinsider.com/image/5aa2f98b2e867219008b4693-2000/rtr31ht7.jpg" alt="trader red screen" data-mce-source="Reuters / Jianan Yu" /></p><p></p>
<ul>
<li><strong>Much of Wall Street is in agreement that the 10% stock market correction last month was actually healthy for the stock market.</strong></li>
<li><strong>One investment strategist argues the cleansing effect of the selloff wasn't as pronounced as many are making it out to be.</strong></li>
</ul>
<hr />
<p>It's amazing what difference a month can make.</p>
<p>Around this point in February, on the heels of a 10% <a href="http://www.businessinsider.com/category/stock-market" target="_blank" rel="noopener">stock market</a> correction that caught many investors off-guard, doomsayers across <a href="http://www.businessinsider.com/category/wall-street" target="_blank" rel="noopener">Wall Street</a> were sounding the alarm on inflationary fears.</p>
<p>Bond yields were spiking, <a href="http://www.businessinsider.com/category/wage-inflation" target="_blank" rel="noopener">wage inflation</a> was climbing, and many experts cited quicker monetary tightening from the <a href="http://www.businessinsider.com/category/federal-reserve" target="_blank" rel="noopener">Federal Reserve</a> as the foremost headwind to further stock gains.</p>
<p>Now, weeks later, on the heels of what was a <a href="http://www.businessinsider.com/stock-market-reaction-to-jobs-report-nonfarm-payroll-unemployment-rate-wage-growth-data-2018-3">perfect jobs report for stock bulls</a>, the naysayers are awfully quiet. And the tone of Wall Street commentary has softened considerably. In fact, many strategists are citing the correction as a healthy watershed moment for US stocks &mdash; one that allowed them to take a breath and reset.</p>
<p>For one, <a href="http://www.businessinsider.com/category/marko-kolanovic" target="_blank" rel="noopener">Marko Kolanovic</a>, <a href="http://markets.businessinsider.com/stocks/jpm-stock" target="_blank" rel="noopener">JPMorgan</a>'s global head of quantitative and derivatives strategy &mdash; a man so respected that his research can move markets &mdash; is feeling constructive on the market.</p>
<p>While he's never been outwardly bearish, his commentary in past months has contained an underlying sense of unease, particularly relating to <a href="http://www.businessinsider.com/short-vix-bets-new-record-1987-market-crash-2017-10" target="_blank" rel="noopener">short-volatility products</a>. Now that <a href="http://www.businessinsider.com/xiv-svxy-short-vix-volatility-trade-blow-up-2018-2" target="_blank" rel="noopener">two of the most popular vehicles for shorting volatility have imploded</a>, his criticism of the trade is noticeably absent from recent research.</p>
<p>Instead, Kolanovic is choosing to focus on the positive, such as the anticipated record $800 billion of stock <a href="http://www.businessinsider.com/category/buybacks" target="_blank" rel="noopener">buybacks</a> JPMorgan is forecasting for 2018, among other things.</p>
<p>"Favorable macroeconomic fundamentals and corporate profits outlook remain intact," he wrote this past week. "Both positioning and valuation look more attractive following equities' technical sell-off in early February."</p>
<p>Then there's Jonathan Golub, chief US equity strategist at Credit Suisse. While he's still worried about accelerating wage inflation, he doesn't see enough risk in the market to adjust his <a href="http://markets.businessinsider.com/index/s&amp;p_500" target="_blank" rel="noopener">S&amp;P 500</a> price target of 3,000 &mdash; which is 8% above current levels.</p>
<p>The chart below informs his lack of concern. It contains seven historical recessionary drivers, and only one &mdash; inflation trends &mdash; is even in neutral territory. The other six are all still expansionary, by his measure.</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static1.businessinsider.com/image/5aa2f08ba4f4ac19008b463c-704/screen shot 2018-03-09 at 33714 pm.png" alt="Screen Shot 2018 03 09 at 3.37.14 PM" data-mce-source="Credit Suisse" /></p>
<p>Even Michael Hartnett, the <a href="http://www.businessinsider.com/category/bank-of-america-merrill-lynch" target="_blank" rel="noopener">Bank of America Merrill Lynch</a> chief investment strategist who has repeatedly warned for months that investor overexuberance is a huge problem, is coming around.</p>
<p>The proprietary sell signal he maintains &mdash; called the&nbsp;BAML Bull &amp; Bear Indicator &mdash; has slipped out of "extreme bullish" territory after spending several weeks locked there. That said, he's still cautious, citing the withdrawal of global quantitative easing, but he's nowhere near as bearish as he was a month ago.</p>
<h2>Bearish sentiment lingers</h2>
<p>Upon first glance, Leuthold Group chief investment officer Doug Ramsey seems to fit nicely into the bullish chorus outlined above.</p>
<p>While he notes the bull market's early periods of turbulence &mdash; in 2010 and 2011 &mdash; were "confidence breakers," he says the February meltdown was a "confidence builder." Ramsey compares the correction to a "10% off sale," and highlights upward revisions to earnings growth estimates as a bullish driver.</p>
<p>But he also poses one key question: "How refreshing is a correction that left our S&amp;P 500 5-year normalized P/E at a 95th percentile reading on the day of the low?"</p>
<p>In other words, the seemingly drastic selloff only put a minor dent in valuations, which should make investors cautious. And Ramsey's argument flies in the face of Wall Street's newfound confidence, bringing into question whether the 10% correction was truly the shake-out stocks needed. As such, he's bearish on the ongoing stock market rally.</p>
<p>"The fundamental backdrop is certainly more dangerous than it was just a few months ago, with various monetary and liquidity measures dropping to multi-year lows," he said. "That&rsquo;s a climate the current bull has never had to negotiate. If the correction proves to be one to buy, we think the rally will be one to sell."</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/cvs-bond-offering-inside-the-deal-according-to-lead-barclays-bankers-2018-3" >An inside look at CVS' $40 billion bond deal, one of the biggest of all time, from the lead bankers' perspective</a></strong></p>
<p><a href="http://www.businessinsider.com/stock-market-meltdown-wall-street-agreement-could-lead-to-next-selloff-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/555-phone-number-tv-movies-telephone-exchange-names-ghostbusters-2018-3">Why 555 is always used for phone numbers on TV and in movies</a></p> http://www.businessinsider.com/goldman-sachs-trade-recommendations-for-merger-and-acquisition-activity-pickup-2018-3Wall Street is expecting an M&A explosion this year — and Goldman Sachs knows how you can make a killing betting on ithttp://www.businessinsider.com/goldman-sachs-trade-recommendations-for-merger-and-acquisition-activity-pickup-2018-3
Fri, 16 Mar 2018 11:09:00 -0400Joe Ciolli
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static5.businessinsider.com/image/5aabcb7292c06931008b468d-2000/gettyimages-93093701.jpg" alt="trader happy smile" data-mce-source="Getty Images / Mario Tama" /></p><p></p>
<ul>
<li><strong>The consensus on Wall Street is that merger and acquisition (M&amp;A) activity is going to accelerate after a relatively slow 2017.</strong></li>
<li><strong>The derivatives team at Goldman Sachs has outlined how investors can use options to both identify and capitalize on M&amp;A speculation.</strong></li>
</ul>
<hr />
<p>It's common knowledge that positioning for a share price spike following the announcement of a <a href="http://www.businessinsider.com/category/ma" target="_blank" rel="noopener">merger and acquisition</a> (M&amp;A) deal is a great way to make a quick buck in the <a href="http://www.businessinsider.com/category/stock-market" target="_blank" rel="noopener">stock market</a>.</p>
<p>Companies are usually purchased at a premium to their current market value, which leads to a stock surge as investors rush to close the pricing gap. With that in mind, it would seem that the best possible way to trade on M&amp;A speculation would be to simply buy shares of potential targets.</p>
<p>Not so fast, says <a href="http://markets.businessinsider.com/stocks/gs-stock" target="_blank" rel="noopener">Goldman Sachs</a>. Katherine Fogertey and the rest of the firm's derivatives strategy team thinks you can do a whole lot better than that.</p>
<p>But before we get into their recommendations, let's first look at what's at stake. Many Wall Street firms &mdash; including Goldman, <a href="http://markets.businessinsider.com/stocks/bac-stock" target="_blank" rel="noopener">Bank of America</a>, <a href="http://markets.businessinsider.com/stocks/wfc-stock" target="_blank" rel="noopener">Wells Fargo</a>, and Robert W. Baird &mdash; are in <a href="http://www.businessinsider.com/wall-street-thinks-tax-reform-will-help-one-crucial-market-area-2018-1" target="_blank" rel="noopener">full agreement that M&amp;A is due for a major pick-up</a>&nbsp;this year. Their optimism comes on the&nbsp;heels of a disappointing 2017 that saw global mergers fall 9%.</p>
<p>The general consensus is that <a href="http://www.businessinsider.com/category/tax-reform" target="_blank" rel="noopener">tax reform</a> will be the major driver, given the huge glut of repatriated cash flowing back into the US from overseas. Going off that, Goldman recently forecast a 6% increase in cash M&amp;A spending to $355 billion in 2018.</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static1.businessinsider.com/image/5aabcebfb085c019008b4682-800/screen shot 2018-03-16 at 100257 am.png" alt="Screen Shot 2018 03 16 at 10.02.57 AM" data-mce-source="Goldman Sachs" /></p>
<p>So what's a trader to do? Goldman has identified two crucial steps for investors to consider.</p>
<h3>1) Identify whether an M&amp;A premium is already priced into a stock</h3>
<p>Goldman's strategy for identifying potential M&amp;A candidates involves analyzing the footprints left behind by trades that investors do when they see high potential for a takeover. This is an important first step in identifying opportunities for stock price appreciation.</p>
<p>One way the firm does this is by looking at a measure called skew, which is the premium being paid for out-of-the-money (OTM)&nbsp;<a href="http://www.businessinsider.com/category/options" target="_blank" rel="noopener">options</a>. For this scenario, Goldman is looking for increases in call prices relative to puts, since investors buy short-dated calls to position for M&amp;A-driven stock spikes.</p>
<p>Goldman also looks at term structure, or the trend of <a href="http://www.businessinsider.com/category/volatility" target="_blank" rel="noopener">volatility</a>&nbsp;being expected in the future. The firm notes that a decrease in long-dated options prices relative to short-dated ones is another signal suggesting investors are already positioning for a deal.</p>
<h3>2) Make the following types of option trades to capitalize on opportunities identified during step 1</h3>
<p>Goldman has two distinct strategies for expressing a view on M&amp;A potential.&nbsp;</p>
<p>The first is the purchase of three-month OTM call options. And the second method is the sale of 12-month, OTM&nbsp;strangles &mdash; defined as the simultaneous selling of a slightly OTM&nbsp;put and a slightly OTM&nbsp;call of the same underlying stock and expiration date.</p>
<p>Better yet, Goldman says these trades become even more effective when used in tandem.</p>
<p>However, in the end, it's important to remember that these trades are ineffective unless an investor is first able to locate soft spots in trader positioning. That's why the two steps laid out above are so important. One leads nicely into the other &mdash; and they both hopefully lead to some big gains for M&amp;A speculators.</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/asset-manager-fees-in-trouble-big-wall-street-firms-at-risk-says-morgan-stanley-oliver-wyman-2018-3" >An 'Amazon-type marketplace' could cut asset-management fees in half — and some of Wall Street's biggest names could take a huge hit</a></strong></p>
<p><a href="http://www.businessinsider.com/goldman-sachs-trade-recommendations-for-merger-and-acquisition-activity-pickup-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/what-would-happen-if-humans-tried-landing-on-jupiter-space-2018-2">What would happen if humans tried to land on Jupiter</a></p> http://www.businessinsider.com/11-stocks-ubs-says-to-avoid-in-trade-war-2018-3Trump's trade war is heating up — here are 11 stocks UBS says to avoidhttp://www.businessinsider.com/11-stocks-ubs-says-to-avoid-in-trade-war-2018-3
Wed, 14 Mar 2018 22:27:00 -0400Joe Ciolli
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static4.businessinsider.com/image/5aa923803be59f1c008b459d-2000/ap17198757229958.jpg" alt="Trump Xi trade war" data-mce-source="AP/Saul Loeb" data-mce-caption="US President Donald Trump, left, and Chinese President Xi Jinping arrive for a meeting on the sidelines of the G-20 Summit in Hamburg, Germany." /></p><p></p>
<ul>
<li><strong>Companies that get a high percentage of their revenue from China are at heightened risk as the prospect of a global trade war mounts.</strong></li>
<li><strong>UBS has identified 11 companies with large exposure to China that it says traders would be wise to avoid.</strong></li>
</ul>
<hr />
<p>Fears of a global <a href="http://www.businessinsider.com/category/trade-war" target="_blank" rel="noopener">trade war</a> have been ratcheted up in recent days amid <a href="http://www.businessinsider.com/trump-trade-war-china-threatens-retaliate-us-2018-3" target="_blank" rel="noopener">warnings from China</a> that it won't take President <a href="http://www.businessinsider.com/category/donald-trump" target="_blank" rel="noopener">Donald Trump</a>'s newly proposed tariffs lying down.</p>
<p>Earlier in March, the nation said it will respond in kind if Trump's measures harm it economically. But that doesn't seem to be impeding the president's mission, with reports coming in Wednesday that he's seeking to <a href="http://www.businessinsider.com/trump-reportedly-looking-at-60-billion-tariffs-on-chinese-tech-imports-2018-3" target="_blank" rel="noopener">impose upon China tariffs of up to $60 billion</a>. Trump will reportedly target the technology and telecom sectors.</p>
<p>In the event that China does retaliate in response to Trump's proposed tariffs, <a href="http://markets.businessinsider.com/stocks/ubs-stock" target="_blank" rel="noopener">UBS</a> says the companies that derive the highest percentage of their sales from there will be among the groups hit hardest. Further, a large number of the most exposed companies are in the tech sector &mdash; suggesting that mounting trade war tensions could weigh on one of the US market's most important industries.</p>
<p>Here are 11 companies identified by UBS as being particularly vulnerable to a global trade war, specifically one that involves China. The stocks are listed in increasing order of percentage revenue exposure to China.</p><h3>11. Xilinx</h3>
<img src="http://static4.businessinsider.com/image/5aa91f1d3be59f1a008b4593-400-300/11-xilinx.jpg" alt="" />
<p><p><strong>Ticker:</strong>&nbsp;XLNX</p>
<p><strong>Industry: </strong>Technology</p>
<p><strong>% of sales from China: </strong>24.6%</p></p>
<br/><br/><h3>10. Expeditors International of Washington</h3>
<img src="http://static4.businessinsider.com/image/5aa91ed63be59f22008b4567-400-300/10-expeditors-international-of-washington.jpg" alt="" />
<p><p><strong>Ticker:</strong>&nbsp;EXPD</p>
<p><strong>Industry: </strong>Industrials</p>
<p><strong>% of sales from China: </strong>26.5%</p></p>
<br/><br/><h3>9. Amphenol</h3>
<img src="http://static1.businessinsider.com/image/5aa91e993be59f1c008b4902-400-300/9-amphenol.jpg" alt="" />
<p><p><strong>Ticker:</strong>&nbsp;APH</p>
<p><strong>Industry: </strong>Technology</p>
<p><strong>% of sales from China: </strong>28.6%</p></p>
<br/><br/><a href="http://www.businessinsider.com/11-stocks-ubs-says-to-avoid-in-trade-war-2018-3#/#8-microchip-technology-4">See the rest of the story at Business Insider</a> http://www.businessinsider.com/stock-market-everything-going-right-for-one-group-set-for-record-highs-2018-3Everything is going exactly right for one group of stocks poised to smash record highshttp://www.businessinsider.com/stock-market-everything-going-right-for-one-group-set-for-record-highs-2018-3
Wed, 14 Mar 2018 22:26:00 -0400Joe Ciolli
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static4.businessinsider.com/image/5a201fbaf914c31e008b6f69-2048/rtxhrsv.jpg" alt="trader celebration" data-mce-source="Reuters / Paulo Whitaker" data-mce-caption="Stock traders celebrate the record streak of outperformance for active managers." /></p><p></p>
<ul>
<li><strong>As volatility has picked up in equities, it has become increasingly important to identify specific areas of the stock market poised for strength.</strong></li>
<li><strong>Bank of America Merrill Lynch is highly constructive in the near term on one group that has everything going for it at the moment.</strong></li>
</ul>
<hr />
<p>When market sell-offs hit, it's usually the smaller, less liquid stocks that get hurt the most.</p>
<p>But last month, when the <a href="http://www.businessinsider.com/category/stock-market" target="_blank" rel="noopener">stock market</a> suffered its first 10% correction in years, the opposite happened. Large-cap companies actually fell more than their small-cap counterparts, bucking conventional wisdom.</p>
<p>And if they didn't already have enough going for them, <a href="http://www.businessinsider.com/category/small-caps" target="_blank" rel="noopener">small-caps</a> proceeded to beat their larger peers on the way back up. Now, the group's double dip of resilience and good fortune has it poised to shatter records.</p>
<p><img src="http://static1.businessinsider.com/image/5aa943dc3be59f1c008b45fd-1200/3-14-18-small-vs-large-cap-cotd.png" alt="3 14 18 small vs large cap COTD" data-mce-source="Bank of America Merrill Lynch" data-mce-caption="Small-caps have been outperforming their larger peers since early February, a period that has featured both a major sell-off and a return to near-record highs." /></p>
<p>So how did small-caps find themselves in this situation? The <a href="http://www.businessinsider.com/category/bank-of-america-merrill-lynch" target="_blank" rel="noopener">Bank of America Merrill Lynch</a> equity strategist Dan Suzuki has identified three main drivers.</p>
<p>First, he notes that the relative illiquidity seen in small-caps actually benefited them during the early-February market meltdown, which was worsened by forced selling in <a href="http://www.businessinsider.com/category/volatility" target="_blank" rel="noopener">volatility</a> products. Since small-caps are more thinly traded, they weren't as vulnerable to sharp, sudden price movements.</p>
<p>Second, Suzuki highlights the new tax law as having an outsize positive impact on small-caps. He says the group, on average, paid higher taxes before the cuts and would therefore see a bigger profitability boost.</p>
<p>Third, he argues the escalating prospect of a global trade war will favor more domestically focused companies, such as small-caps. It's a dynamic that has <a href="http://www.businessinsider.com/stock-market-selloff-one-group-poised-to-defy-investor-trade-war-fears-2018-3" target="_blank" rel="noopener">already played out</a> since President <a href="http://www.businessinsider.com/category/donald-trump" target="_blank" rel="noopener">Donald Trump</a> first announced tariffs on steel and aluminum, with small-caps outperforming broader indexes.</p>
<p>Beyond those three factors and looking forward, Suzuki says small-caps are more appealing on a valuation basis. He bases this on how much small-cap prices have contracted since November, noting that both mid- and large-cap indexes have seen more moderate pullbacks, making them expensive by comparison.</p>
<p>Don't believe Suzuki? Well, he has company on Wall Street, with Goldman Sachs also espousing the positive characteristics of small-caps. In the weeks following February's 10% correction, <a href="http://www.businessinsider.com/stock-market-post-selloff-buy-recommendations-goldman-sachs-2018-2" target="_blank" rel="noopener">Goldman highlighted small-caps</a> as one of the two best stock market bets, on an investment-factor basis.</p>
<p>"We maintain our tactically bullish stance on small-caps over large-caps given the accelerating economic and corporate profit outlook," Suzuki wrote in a client note. "The near-term risks appear firmly to the upside."</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/global-markets-undergoing-major-change-leaving-investors-at-risk-2018-3" >'No places to hide': Global markets are undergoing a major change that's left investors at serious risk</a></strong></p>
<p><a href="http://www.businessinsider.com/stock-market-everything-going-right-for-one-group-set-for-record-highs-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/meaning-of-fake-news-and-make-america-great-again-steven-pinker-2018-3">Harvard professor Steven Pinker explains the disturbing truth behind Trump's 2 favorite phrases</a></p> http://markets.businessinsider.com/news/stocks/dow-jones-stock-market-drops-more-than-300-points-as-fears-of-a-potential-trade-war-rise-2018-3-1018704922The Dow slid about 250 points amid China trade retaliation fearshttp://markets.businessinsider.com/news/stocks/dow-jones-stock-market-drops-more-than-300-points-as-fears-of-a-potential-trade-war-rise-2018-3-1018704922
Wed, 14 Mar 2018 16:12:00 -0400Graham Rapier
<p><img src="http://static3.businessinsider.com/image/5aa981a53be59f20008b459b-864/screen shot 2018-03-14 at 40924 pm.jpg" alt="dow jones" data-mce-source="Markets Insider" data-link="http://markets.businessinsider.com/index/dow_jones" /></p><p></p>
<ul>
<li><strong>China <a href="http://www.businessinsider.com/trump-trade-war-china-threatens-retaliate-us-2018-3">threatened</a> to retaliate against President Trump's new tariffs on imported metals on Wednesday.</strong></li>
<li><strong>Retail sales fell short of estimates.</strong></li>
<li><strong>The Atlanta Fed's GDP tracker now sees 1.9% growth in the first quarter.</strong></li>
<li><strong>The <a href="http://markets.businessinsider.com/index/dow_jones">Dow Jones industrial average</a> fell 248 points in total.</strong></li>
<li><strong><a href="http://markets.businessinsider.com/index/dow_jones">You can track the Dow in real-time on Markets Insider here&gt;&gt;</a></strong></li>
</ul>
<hr />
<p>The<a href="http://markets.businessinsider.com/index/dow_jones"> Dow Jones industrial average</a> fell as much as 306 points on Wednesday and closed down 248 points. The index was bogged down by concerns of possible <a href="http://www.businessinsider.com/trump-trade-war-china-threatens-retaliate-us-2018-3">Chinese retaliation</a> against President Donald Trump's metals tariffs, disappointing retail sales, and another downward revision to the Atlanta Fed's first-quarter GDP forecast.&nbsp;</p>
<p>The 30-stock index attempted to claw its way back to the green in the afternoon as Trump <a href="http://www.businessinsider.com/larry-kudlow-replace-gary-cohn-trump-top-economic-adviser-2018-3">named CNBC commentator Larry Kudlow as his top economic advisor</a>, replacing Gary Cohn.</p>
<p>Early Wednesday, China's National People's Congress spokesperson&nbsp;<a href="http://www.businessinsider.com/trump-trade-war-china-threatens-retaliate-us-2018-3">threatened to retaliate</a> to the US president's proposed new tariffs on steel and aluminum,&nbsp;<span>according to reports.&nbsp;</span>China doesn't want a trade war, the politician said, but it will respond in kind if Trump's tariffs harm it economically.</p>
<p><span>In economic data, retail sales <a href="http://www.businessinsider.com/retail-sales-drop-raises-worries-about-consumer-spending-growth-2018-3">unexpectedly fell for the third straight month</a>, according to statistics published by the government. Additionally, the Atlanta Fed's latest projection for first-quarter GDP was revised down to 1.9%. It had been as high as 5.4% in early February.&nbsp;</span></p>
<p><a href="http://markets.businessinsider.com/stocks/ba-stock">Boeing</a>, which could be a potential target of retaliatory tariffs by China, was among the hardest hit, falling more than 4%. China has agreed to<a href="https://www.cnbc.com/2018/03/14/chinas-path-to-tariff-retribution-could-begin-with-boeing.html"><span> buy about $1 trillion worth of aircraft</span></a> over the next two decades from the company.</p>
<p>Companies that get a high percentage of their revenue from China are also at heightened risk as the prospect of a global trade war mounts, according to UBS. The Swiss bank identified&nbsp;<a href="http://www.businessinsider.com/11-stocks-ubs-says-to-avoid-in-trade-war-2018-3"><span>11 stocks to avoid if a trade war does break out.</span></a></p>
<p><span>Only three Dow components were in the green Wednesday afternoon, <a href="http://markets.businessinsider.com/stocks/csco-stock">Cisco</a>,&nbsp;<a href="http://markets.businessinsider.com/stock/nke-stock">Nike</a>, and <a href="http://markets.businessinsider.com/stocks/dis-stock">Disney</a>, which announced a <a href="https://www.nytimes.com/2018/03/14/business/media/walt-disney-21st-century-fox.html">major reorganization</a> as it prepares to incorporate 21st Century Fox assets.</span></p><p><strong>SEE ALSO:&nbsp;<a href="http://markets.businessinsider.com/news/stocks/Walmart-has-hinted-that-it-may-want-to-make-crop-pollinating-robot-bees-1018704469" >Walmart has hinted that it may want to make crop-pollinating robot bees</a></strong></p>
<p><a href="http://markets.businessinsider.com/news/stocks/dow-jones-stock-market-drops-more-than-300-points-as-fears-of-a-potential-trade-war-rise-2018-3-1018704922#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/meaning-of-fake-news-and-make-america-great-again-steven-pinker-2018-3">Harvard professor Steven Pinker explains the disturbing truth behind Trump's 2 favorite phrases</a></p> http://www.businessinsider.com/global-markets-undergoing-major-change-leaving-investors-at-risk-2018-3'No places to hide': Global markets are undergoing a major change that's left investors at serious riskhttp://www.businessinsider.com/global-markets-undergoing-major-change-leaving-investors-at-risk-2018-3
Tue, 13 Mar 2018 12:07:00 -0400Joe Ciolli
<p><img src="http://static4.businessinsider.com/image/5aa7d8873be59f23008b4635-2000/gettyimages-921402802.jpg" alt="trader hide" data-mce-source="Getting Images / Spencer Platt" /></p><p></p>
<ul>
<li><strong>For much of the past few years, investors have had plentiful options when it comes to hedging to the downside.</strong></li>
<li><strong>Goldman Sachs argues that markets are going through a major change that's threatening traders' ability to feel safe in their investments.</strong></li>
</ul>
<hr />
<p>Whether you've been a staunch bull or skeptical bear over the past few years, there have always been places to hide if you want to get away from it all.</p>
<p><a href="http://markets.businessinsider.com/rates/u-s--rates-10-years" target="_blank" rel="noopener">Treasurys</a>, gold, and safe-haven currencies like the <a href="http://markets.businessinsider.com/currencies/usd-jpy" target="_blank" rel="noopener">Japanese yen</a> and the <a href="http://markets.businessinsider.com/currencies/usd-chf" target="_blank" rel="noopener">Swiss franc</a> have been reliable hedges of sorts, providing needed fallback returns during risk-off environments.</p>
<p>That's no longer the case, and it has left traders with "no places to hide," Goldman Sachs says.</p>
<p><img style="float:right;" src="http://static6.businessinsider.com/image/5aa7e3543be59f1b008b459b-547/screen shot 2018-03-13 at 103436 am.png" alt="Screen Shot 2018 03 13 at 10.34.36 AM" data-mce-source="Goldman Sachs" /></p>
<p>The firm notes the diverging performance of Treasurys and other haven assets, marking a reversal from last year when they were moving in lockstep. This development challenges the reliability of what have historically been viewed as surefire hedges.</p>
<p>Goldman attributes the market shake-up to two drivers it says have thrown the long-standing <a href="http://www.businessinsider.com/market-valuations-goldman-sachs-warns-most-expensive-since-1900-2017-11" target="_blank" rel="noopener">Goldilocks market</a> &mdash; characterized by strong growth without inflation &mdash; out of whack.</p>
<p>The first is the pressure caused by higher rates and monetary tightening from the <a href="http://www.businessinsider.com/category/federal-reserve" target="_blank" rel="noopener">Federal Reserve</a>. While the market largely expected the central bank's initial rate hikes, they've still led to a "rate shock environment," Goldman says. The firm also blames an unexpectedly weak dollar, which it says has been driven by global growth.</p>
<p>Another measure informing Goldman's conclusion that effective hedges are scarce is the degree to which traditional haven assets are tracking the <a href="http://markets.businessinsider.com/index/vix" target="_blank" rel="noopener">Cboe Volatility Index</a>, known as the VIX. None of the 21 assets Goldman looked at had a positive beta to the VIX, which has led to "diversification desperation," it said. (See the chart below for details.)</p>
<p>For context, the VIX trades inversely to the benchmark <a href="http://markets.businessinsider.com/index/s&amp;p_500" target="_blank" rel="noopener">S&amp;P 500</a> roughly 80% of the time, suggesting it's an effective hedge for the equity index. Theoretically, if haven assets are trading with a positive beta to the VIX, they should be doing their job as hedges. But that's apparently not the case right now.</p>
<p>"No safe havens &mdash; and no assets or equity sectors &mdash; have had a positive beta to the VIX recently," Goldman strategists led by Ian Wright wrote in a note to clients. "Finding effective hedges in the cash space will continue to be difficult going forward as rates rise and Goldilocks fades."</p>
<p><img src="http://static2.businessinsider.com/image/5aa7e6153be59f1c008b4650-806/screen shot 2018-03-13 at 105400 am.png" alt="Screen Shot 2018 03 13 at 10.54.00 AM" data-mce-source="Goldman Sachs" /></p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/etf-industry-growth-interview-with-martin-small-blackrock-ishares-investor-letter-2018-3" >The head of a $1 trillion ETF provider shares a bold prediction for the record-shattering industry</a></strong></p>
<p><a href="http://www.businessinsider.com/global-markets-undergoing-major-change-leaving-investors-at-risk-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/open-bionics-prosthetic-arms-2018-2">These bionic arms make kids feel like superheroes</a></p> http://www.businessinsider.com/etf-industry-growth-interview-with-martin-small-blackrock-ishares-investor-letter-2018-3The head of a $1 trillion ETF provider shares a bold prediction for the record-shattering industryhttp://www.businessinsider.com/etf-industry-growth-interview-with-martin-small-blackrock-ishares-investor-letter-2018-3
Tue, 13 Mar 2018 09:00:00 -0400Joe Ciolli
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static3.businessinsider.com/image/5aa7c61e3be59f1e008b45e8-2200/rtxzi4a.jpg" alt="crystal ball" data-mce-source="Reuters / Andy Clark" /></p><p></p>
<ul>
<li><strong>The $4.5 trillion exchange-traded fund industry is shattering all sorts of records for growth.</strong></li>
<li><strong>Martin Small, the head of BlackRock iShares for the US and Canada, has a bold prediction for the industry.</strong></li>
</ul>
<hr />
<p><em>How did we ever live without them?</em></p>
<p>That's the first line of the annual <a href="https://www.ishares.com/us/lp/ishares-investors" target="_blank" rel="noopener">investor letter</a> from <a href="https://www.blackrock.com/investing/biographies/martin-small" target="_blank" rel="noopener">Martin Small</a>,&nbsp;<span>who's responsible for more than $1 trillion as the head of&nbsp;</span>BlackRock&nbsp;<a href="https://www.ishares.com/us" target="_blank" rel="noopener">iShares</a>&nbsp;for the US and Canada. And it raises a question many people have been asking themselves about&nbsp;<a href="http://www.businessinsider.com/category/etfs" target="_blank" rel="noopener">exchange-traded funds</a>.</p>
<p>Small would seem to have a point. With the global ETF industry growing beyond $4.5 trillion for the first time in 2017 &mdash; including $1.8 trillion in assets under management for iShares, the world's biggest provider &mdash; the hottest investment vehicle around is more everpresent than at any other point in history.</p>
<p>Which is why Small feels comfortable making a bold prediction: by 2020, half of US investors will have made ETFs an "integral part of how they build portfolios."</p>
<p>If that seems far-fetched, consider that one-in-three US investors already owns at least one ETF, according to a <a href="https://www.ishares.com/us/resources/insights/etf-pulse" target="_blank" rel="noopener">survey conducted by iShares</a>. But where is the growth coming from?</p>
<p><img style="float:right;" src="http://static2.businessinsider.com/image/5a6658f300d0eff5018b4884-360/martin small.jpg" alt="martin small" data-mce-source="ETF.com" data-link="http://www.etf.com/" /></p>
<p>"The people who are already in ETFs are just going deeper," Small told Business Insider by phone. "And there are people coming from single securities and high-priced products into ETFs."</p>
<p>In the US market alone, ETFs saw combined assets climb to more than $3.6 trillion in January, a roughly $1 trillion year-over-year increase, according to <a href="https://www.ici.org/research/stats/etf/etfs_01_18" target="_blank" rel="noopener">Investment Company Institute</a> data.</p>
<p>A big part of that 12-month increase stems from an increased profile for ETFs, a wider range of offerings, and record-setting market performance that investors were fearful of missing.</p>
<p>"2017 was a real breakout year, the first one where we really started propelling towards seismic change," Small said. "Maybe in five years, people will look back at my letter and marvel at the fact that we used to do it another way."</p>
<p>A great deal of interest in iShares ETFs has come from overseas, as indicated by the $201 billion that global investors poured into US iShares funds in 2017, according to BlackRock data.</p>
<p>The firm is also reaching a younger audience, as evidenced by a <a href="http://www.businessinsider.com/millennials-leading-etf-exchange-traded-fund-revolution-interview-with-martin-shares-blackrock-ishares-2018-1" target="_blank" rel="noopener">survey of more than 1,000 people</a> conducted by iShares in January. They found that roughly 42% of the millennials surveyed own ETFs, up from 33% last year, the biggest jump of any category.&nbsp;Further, 85% of millennials surveyed said they were planning to buy ETF exposure in the next year.</p>
<p>But perhaps most importantly of all, Small notes ETFs have given people a sense of comfort and clarity in an increasingly complex investment landscape:&nbsp;</p>
<p>"All the academic research and investment techniques that people put in opaque or non-transparent wrappers have been demystified thanks to the transparency of ETFs," said Small. "That&rsquo;s why we like to ask: How did we ever live without them?"</p>
<p><strong>Read the full BlackRock iShares investor letter <a href="https://www.ishares.com/us/lp/ishares-investors" target="_blank" rel="noopener">here</a>.</strong></p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/barclays-bond-business-top-underwriter-interview-explanation-2018-3" >Barclays has now run point on the 3 biggest debt deals in history — here's how it's able to punch above its weight class</a></strong></p>
<p><a href="http://www.businessinsider.com/etf-industry-growth-interview-with-martin-small-blackrock-ishares-investor-letter-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/cut-cable-directv-now-streaming-cord-cutting-youtube-tv-hulu-sling-2018-3">I quit cable for DirecTV Now and it's saving me over $1,000 a year — here's how I did it</a></p> http://www.businessinsider.com/stock-market-today-2-surprising-charts-show-traders-not-losing-sleep-over-trade-war-2018-3People are freaking out about a trade war — but the stock market is saying something elsehttp://www.businessinsider.com/stock-market-today-2-surprising-charts-show-traders-not-losing-sleep-over-trade-war-2018-3
Mon, 12 Mar 2018 09:20:00 -0400Joe Ciolli
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static4.businessinsider.com/image/59d78192c68d7b1d008b850b-1810/rtx35xbd.jpg" alt="animated trader" data-mce-source="Reuters / Brendan McDermid" data-mce-caption="Traders are doubling down on volatility bearishness." /></p><p></p>
<ul>
<li><strong>A widespread narrative around a possible global trade war is that it would hurt the most internationally exposed companies.</strong></li>
<li><strong>Goldman Sachs says this isn't true, and it has two charts to prove it.</strong></li>
</ul>
<hr />
<p>One of the most widespread narratives in the market right now is that President <a href="http://www.businessinsider.com/category/donald-trump" target="_blank" rel="noopener">Donald Trump</a>'s newly announced tariffs on steel and aluminum will result in a global <a href="http://www.businessinsider.com/category/trade-war" target="_blank" rel="noopener">trade war</a> as other countries retaliate.</p>
<p>And since the largest companies in <a href="http://markets.businessinsider.com/indices" target="_blank" rel="noopener">major indexes</a> tend to be the ones that conduct the most business overseas, there has been some apprehension around the overall health of the stock market.</p>
<p><a href="http://markets.businessinsider.com/stocks/gs-stock" target="_blank" rel="noopener">Goldman Sachs</a> says not so fast. The firm argues that the market has held up just fine in the face of trade-war fears, and it has two charts to prove it.</p>
<p>The first one shows that stock prices for companies with high imported costs of good sold &mdash; such as agriculture firms, luxury consumer companies, and media and telecom corporations &mdash; have "generally demonstrated no signs of concern." This can be seen by their relatively flat indexed performance.</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static2.businessinsider.com/image/5aa6734c3be59f1e008b45d8-713/screen shot 2018-03-12 at 83202 am.png" alt="Screen Shot 2018 03 12 at 8.32.02 AM" data-mce-source="Goldman Sachs" /></p>
<p>The second chart provided by Goldman highlights the surprising outperformance of US stocks that have both high international sales and specific exposure to Europe and China. The strength shown by both groups is perhaps the most direct refutation of the "trade war is bad for mega-cap US stocks" narrative.</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static5.businessinsider.com/image/5aa673753be59f25008b45a9-750/screen shot 2018-03-12 at 83248 am.png" alt="Screen Shot 2018 03 12 at 8.32.48 AM" data-mce-source="Goldman Sachs" /></p>
<p>Goldman does note, however, that small-cap stocks &mdash; or those with presumably the least exposure to a trade war &mdash; have outperformed the broader market in recent weeks. And while there's no denying that small caps have been <a href="http://www.businessinsider.com/stock-market-selloff-one-group-poised-to-defy-investor-trade-war-fears-2018-3" target="_blank" rel="noopener">a good place to be</a> during that period, Goldman argues that the group's outsize returns are more a reflection of it playing catch-up after lagging for months.</p>
<p>"Although equity prices have moved in reaction to the proposed metals tariffs, investors do not appear concerned about escalating trade conflict," David Kostin, Goldman's head of US equity strategy, wrote in a client note.</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/cvs-bond-offering-inside-the-deal-according-to-lead-barclays-bankers-2018-3" >An inside look at CVS' $40 billion bond deal, one of the biggest of all time, from the lead bankers' perspective</a></strong></p>
<p><a href="http://www.businessinsider.com/stock-market-today-2-surprising-charts-show-traders-not-losing-sleep-over-trade-war-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/why-nasa-has-not-sent-humans-to-mars-2018-2">The surprising reason why NASA hasn't sent humans to Mars yet</a></p> http://www.businessinsider.com/goldman-sachs-5-ways-companies-can-battle-back-against-higher-rates-2018-3GOLDMAN SACHS: Here are the 5 ways companies can win their escalating battle with higher rateshttp://www.businessinsider.com/goldman-sachs-5-ways-companies-can-battle-back-against-higher-rates-2018-3
Sun, 11 Mar 2018 13:14:00 -0400Business Insider
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static4.businessinsider.com/image/56c4ed7e6e97c660008b7d46-1600/braveheart-3.jpg" alt="braveheart" data-mce-source="&amp;quotBraveheart&amp;quot/Paramount Pictures" /></p><p></p>
<ul>
<li><strong>Goldman Sachs has some ideas for how companies can offset higher rates by pursuing internal growth.</strong></li>
<li><strong>The firm sees 4% as a crucial threshold for the US 10-year Treasury yield.</strong></li>
</ul>
<hr />
<p>If US companies are going to withstand the pressure of <a href="http://www.businessinsider.com/category/federal-reserve" target="_blank" rel="noopener">Federal Reserve</a> monetary tightening, they're going to have to grow.</p>
<p>So says <a href="http://markets.businessinsider.com/stocks/gs-stock" target="_blank" rel="noopener">Goldman Sachs</a>, which sees 4% as a crucial threshold for <a href="http://markets.businessinsider.com/rates/u-s--rates-10-years" target="_blank" rel="noopener">the US 10-year Treasury yield</a>. If rates exceed 4%, the firm estimates, companies will have to generate 200 basis points of medium-term growth to neutralize the negative effect on valuations.</p>
<p>"A boost to medium-term growth expectations or a decline in the equity risk premium (ERP) could offset the negative valuation impact of rising bond yields," a group of Goldman strategists led by David Kostin, the firm's chief US equity strategist, wrote in a client note.</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static2.businessinsider.com/image/5aa1820274ac6ed24a8b460b-802/screen shot 2018-03-08 at 13318 pm.png" alt="Screen Shot 2018 03 08 at 1.33.18 PM" data-mce-source="Goldman Sachs" /></p>
<p>It's important to note that Goldman is making recommendations in the event of a sudden, unexpected rate increase. The firm's 2018 forecast for the 10-year is just 3.25%, and it's been <a href="http://www.businessinsider.com/how-higher-interest-rates-affect-stocks-goldman-sachs-2018-2" target="_blank" rel="noopener">argued</a> in recent weeks that at least <a href="http://www.businessinsider.com/goldman-sachs-stock-recommendations-6-stocks-to-withstand-rate-hikes-2018-3" target="_blank" rel="noopener">some areas of the market</a> will do just fine on a relative basis regardless of how high rates go.</p>
<p>With that in mind, here are the five ways Goldman says companies can preempt rate-hike madness and stand tall in the face of rate hikes:</p><h3>1. Growth-enhancing investments</h3>
<img src="http://static3.businessinsider.com/image/5aa19717d877e6dd498b460c-400-300/1-growth-enhancing-investments.jpg" alt="" />
<p><p>This includes the growth of <a href="http://www.businessinsider.com/category/capex" target="_blank" rel="noopener">capital expenditures</a>, or capex, as well as research and development.</p>
<p>Goldman notes companies that "invest for growth" have historically outperformed during periods of rising interest rates. In addition, growth investment as a percentage of cash flow from operations has declined close to its lowest level in 30 years, suggesting there's room for a rebound.</p></p>
<br/><br/><h3>2. M&A</h3>
<img src="http://static6.businessinsider.com/image/5aa1996565c6e6244b8b4621-400-300/2-ma.jpg" alt="" />
<p><p>Goldman is referring to the type of <a href="http://www.businessinsider.com/category/ma" target="_blank" rel="noopener">merger-and-acquisition</a>&nbsp;activity that "improves existing revenue streams or offers access to new markets."</p>
<p>And the firm says conditions are ripe for M&amp;A right now, with the ratio of cash-to-assets for <a href="http://markets.businessinsider.com/index/s&amp;p_500" target="_blank" rel="noopener">S&amp;P 500</a> companies sitting at a record high. Goldman also notes tax reform will bring a flood of cash into the US from overseas &mdash; money that companies should put to work.</p></p>
<br/><br/><h3>3. Expansion to new geographic markets</h3>
<img src="http://static2.businessinsider.com/image/5aa19a95c227981e008b462c-400-300/3-expansion-to-new-geographic-markets.jpg" alt="" />
<p><p>Goldman is particularly keen on emerging markets, which account for just 14% of S&amp;P 500 sales, thereby representing a massive area of opportunity.</p>
<p>The firm highlights its proprietary current activity indicator, which it notes is roughly 2 percentage points higher than the US version.&nbsp;</p>
<p>"EM is early in the cycle, and therefore presents an opportunity for incremental growth," Kostin said.</p></p>
<br/><br/><a href="http://www.businessinsider.com/goldman-sachs-5-ways-companies-can-battle-back-against-higher-rates-2018-3#/#4-sustainable-margin-improvements-4">See the rest of the story at Business Insider</a> http://www.businessinsider.com/gary-cohn-resignation-what-experts-are-saying-about-effect-on-markets-2018-3'Wall Street just lost its security blanket': Here's what experts are saying about Gary Cohn's exit from the White Househttp://www.businessinsider.com/gary-cohn-resignation-what-experts-are-saying-about-effect-on-markets-2018-3
Sun, 11 Mar 2018 10:13:00 -0400Business Insider
<p><img src="http://static4.businessinsider.com/image/5aa0137b5cc4101f058b45ac-1905/gettyimages-831967600.jpg" alt="gary cohn white house press conference" data-mce-source="Getty Images / Drew Angerer" /></p><p></p>
<ul>
<li><strong>Reports that Gary Cohn, the top White House economic adviser, would depart the Trump administration sparked immediate selling in global equity markets.</strong></li>
<li><strong>Experts across Wall Street have weighed in with their thoughts.</strong></li>
</ul>
<hr />
<p>Wall Street got another reminder of how volatile the White House is amid reports on Tuesday evening that <a href="http://www.businessinsider.com/category/gary-cohn" target="_blank" rel="noopener">Gary Cohn</a> would step down as <a href="http://www.businessinsider.com/category/donald-trump" target="_blank" rel="noopener">President Donald Trump</a>'s top economic adviser.</p>
<p>The reaction was swift and strong, as <a href="http://markets.businessinsider.com/index/s&amp;p_500" target="_blank" rel="noopener">S&amp;P 500</a> futures immediately tumbled in after-hours trading. The nervousness then <a href="http://www.businessinsider.com/global-stock-market-wrap-indexes-fall-on-gary-cohns-white-house-exit-trade-war-fears-2018-3" target="_blank" rel="noopener">spread throughout global markets</a> overnight, dragging indexes in Asia and Europe lower before US benchmarks opened in the red on Wednesday morning.</p>
<p>The <a href="http://markets.businessinsider.com/index/s&amp;p_500">S&amp;P 500</a> and the <a href="http://markets.businessinsider.com/index/dow_jones" target="_blank" rel="noopener">Dow Jones industrial average</a> remained firmly lower as of Wednesday afternoon.</p>
<p>The broad-based weakness signals investors are worried that Trump's recent protectionist behavior &mdash; most notably his proposed tariffs on steel and aluminum &mdash; will spur a trade war. Concerns include <a href="http://www.businessinsider.com/trump-tariff-on-steel-aluminum-response-eu-canada-china-2018-3" target="_blank" rel="noopener">retaliation from other countries</a> and a negative economic impact that could wind up costing the US <a href="http://tradepartnership.com/reports/does-import-protection-save-jobs-the-estimated-impacts-of-proposed-tariffs-on-imports-of-u-s-steel-and-aluminum-2018/" target="_blank" rel="noopener">hundreds of thousands of jobs</a>.</p>
<p>Trump pushed forward with his tariff announcement last week <a href="http://www.businessinsider.com/gary-cohn-white-house-push-to-end-trump-tariffs-trade-war-2018-3" target="_blank" rel="noopener">despite protests from Cohn</a>, Politico reported. There has also been speculation the Trump administration may be close to <a href="http://www.businessinsider.com/united-states-may-ramp-up-restrictions-on-chinese-imports-foreign-investment-2018-3" target="_blank" rel="noopener">clamping down on Chinese investments</a> in the US and imposing tariffs on imports.</p>
<p>Cohn's departure and the subsequent trade-war-driven market turmoil has been enough to get everyone on Wall Street talking, and they delivered a wide range of reactions on Wednesday.</p>
<p>Here's a roundup of the most insightful commentary.</p>
<h3>Chris Krueger, a strategist at Cowen Washington Research Group</h3>
<p>"Wall Street just lost its security blanket," Krueger said, adding: "We can think of no one who can fill this seat that will give Wall Street as much comfort as Cohn &mdash; particularly with the protectionists on the rise and tariffs top of the agenda."</p>
<p>He continued: "It is not just Cohn's offensive market skill that will be missed &mdash; he was arguably the best defensive player in the West Wing keeping the protectionist advances at bay."</p>
<h3>Brad McMillan, the chief investment officer of Commonwealth Financial Network, which oversees $156 billion</h3>
<p>Cohn was "seen as the voice of economic stability and a spokesperson for financial markets," McMillan said.</p>
<p>"His resignation leaves the president with a set of economic advisers largely seen as outside of the mainstream, or at least perceived as less aligned with Wall Street interests," McMillan said. "At a minimum, this introduces more uncertainty into economic policy and raises the chance of policy actions such as tariffs."</p>
<p>He added: "Markets will likely react negatively to the increased uncertainty. They are also likely to take this as a signal that tariffs are indeed coming &mdash; quite possibly on more than just steel and aluminum. This could hurt business and investor confidence, which are two of the pillars holding up the markets."</p>
<h3>Keith Parker, the chief US equity strategist at UBS</h3>
<p>"The trade pendulum is swinging and raising uncertainty," Parker said. "Starting with solar panels and washing machines, followed by the announcement of broad tariffs on steel and aluminum, investors are assessing the prospect for retaliation and actions against China as NAFTA negotiations continue."</p>
<p>Parker continued: "We view the public reactions of Cohn, select Republicans, corporates, and sovereigns together with the equity sell-off as acting as headwinds to protectionist momentum, particularly with midterm elections nine months away."</p>
<h3>Ethan Harris, the head of global economics research at Bank of America Merrill Lynch</h3>
<p>"Cohn was part of the cohort of advisers within the Trump White House who supported a more traditional free-trade-oriented economic agenda," Harris said. "With the departure of Cohn, the risk is that President Trump leans on White House officials who favor more protectionist economic policies, raising the probability that President Trump will go ahead with some form of tariffs on steel and aluminum imports."</p>
<h3>Isaac Boltansky, the director of policy research at Compass Point</h3>
<p>"The clearest takeaway is that Cohn's departure serves as an unambiguous affirmation of the trade protectionist ascendancy in the West Wing," Boltansky said. "The steel and aluminum tariffs, coupled with Cohn's departure, clearly suggest that President Trump's aggressive posture on trade issues &mdash; including NAFTA and China &mdash; will only harden in the months ahead."</p>
<p>He added: "Cohn has been viewed as a moderating force inside the White House, and his departure will undoubtedly exacerbate the market's recent trepidation. With that being said, numerous clients noted that the magnitude of the market impact could be less than if Cohn departed during the tax-reform push. Our sense is that the brain drain at the White House, coupled with the acuteness of the trade-policy debate, will foster a risk-off bias."</p>
<h3>Charlie Ripley, a senior investment strategist for Allianz Investment Management</h3>
<p>"Protectionist policies will act like a wet blanket on global trade, and markets continue to react negatively to these types of policies," he said. "The bond market isn't reacting as much to this news, as rates are mostly unchanged, but to the extent the landscape for global trade becomes less price competitive, we would expect further upward pressure on inflation and bond yields."</p>
<h3>Cesar Rojas, a global economist at Citigroup</h3>
<p>"The resignation of NEC head Gary Cohn on March 6, a member of the president's inner circle who had reservations about stepping up trade tariffs, might possibly increase Congress' willingness to confront the president about his stiff tactics on international trade," Rojas said.</p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/stock-market-news-bank-of-america-2-charts-suggest-stocks-will-rise-next-2-months-2018-3" >Bank of America: These 2 charts suggest the stock market could soar over the next 2 months</a></strong></p>
<p><a href="http://www.businessinsider.com/gary-cohn-resignation-what-experts-are-saying-about-effect-on-markets-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/open-bionics-prosthetic-arms-2018-2">These bionic arms make kids feel like superheroes</a></p> http://www.businessinsider.com/stock-market-news-bank-of-america-2-charts-suggest-stocks-will-rise-next-2-months-2018-3Bank of America: These 2 charts suggest the stock market could soar over the next 2 monthshttp://www.businessinsider.com/stock-market-news-bank-of-america-2-charts-suggest-stocks-will-rise-next-2-months-2018-3
Sun, 11 Mar 2018 09:13:00 -0400Business Insider
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static5.businessinsider.com/image/5a9f08035cc4101b008b459f-2000/gettyimages-926452474.jpg" alt="trader two finger point" data-mce-source="Getty Images / Stephanie Keith" /></p><p></p>
<ul>
<li><strong>History suggests the stock market will be strong in March and April, according to Bank of America Merrill Lynch's technical analysis team.</strong></li>
<li><strong>The firm provides two charts that uphold its expectation for equity gains over the next two months.</strong></li>
</ul>
<hr />
<p>The next two months should treat the <a href="http://www.businessinsider.com/category/stock-market" target="_blank" rel="noopener">stock market</a> well &mdash; at least if history is any indication.</p>
<p>The technical analysis team at <a href="http://www.businessinsider.com/category/bank-of-america-merrill-lynch" target="_blank" rel="noopener">Bank of America Merrill Lynch</a> has looked at monthly performance for the benchmark <a href="http://markets.businessinsider.com/index/s&amp;p_500" target="_blank" rel="noopener">S&amp;P 500</a> dating all the way back to 1928 and concluded that March and April provide a sweet spot of sorts for equity investors.</p>
<p>The first chart below shows the S&amp;P 500 has, on average, risen 0.62% in March and 1.22% in April. Those are vast improvements upon past Februarys, which have lost money, while also featuring a higher percentage likelihood of the benchmark being positive for the month (as indicated by the yellow line).</p>
<p><img style="display: block; margin-left: auto; margin-right: auto;" src="http://static5.businessinsider.com/image/5a9f086c5cc41023008b460b-744/screen shot 2018-03-06 at 43003 pm.png" alt="Screen Shot 2018 03 06 at 4.30.03 PM" data-mce-source="Bank of America Merrill Lynch" /></p>
<p>"Seasonality tends to improve in March and April," Stephen Suttmeier, a technical research analyst at BAML, wrote in a client note. "The next month with more challenging seasonality is May."</p>
<p>The second chart addresses six-month stretches for the S&amp;P 500, all with different monthly ending points. BAML points out that we're entering the final two months of the November-to-April span, which has historically been the strongest period of the 12 being compared.</p>
<p>That's true both on a return basis &mdash; the S&amp;P 500 has gained 5.39% on average over the period &mdash; and based on percentage likelihood of a positive month (70.8%).</p>
<p>Judging by Wall Street year-end forecasts, BAML's technicals-driven forecast for two months of gains doesn't seem too outlandish. The 24 strategists surveyed by Bloomberg are expecting a 10% S&amp;P 500 gain from current levels by the end of 2018.</p>
<p><img src="http://static2.businessinsider.com/image/5a9f088a5cc41055008b45c4-754/screen shot 2018-03-06 at 43032 pm.png" alt="Screen Shot 2018 03 06 at 4.30.32 PM" data-mce-source="Bank of America Merrill Lynch" /></p><p><strong>SEE ALSO:&nbsp;<a href="http://www.businessinsider.com/jpmorgan-stock-market-outlook-trusted-strategy-on-final-legs-2018-3" >JPMORGAN: The stock market's most trusted strategy is on its last legs</a></strong></p>
<p><a href="http://www.businessinsider.com/stock-market-news-bank-of-america-2-charts-suggest-stocks-will-rise-next-2-months-2018-3#comments">Join the conversation about this story &#187;</a></p> <p>NOW WATCH: <a href="http://www.businessinsider.com/open-bionics-prosthetic-arms-2018-2">These bionic arms make kids feel like superheroes</a></p>